Colin had the benefit of close friendship with Popper over seven decades (late 30s to early 90s) and in Part One he has given a very clear account of Popper’s leading ideas in epistemology, metaphysics and the philosophy of science.

The early part of the 1980s looked like a good time for Popper’s reputation with the appearance of the three volumes of The Postscript to The Logic of Scientific Discovery, a magnificent collection of papers for his 80th birthday (In Pursuit of Truth, edited by Paul Levinson) and another collection soon after (ETC. A Review of General Semantics, Fall 1985). Bill Bartley’s important book Retreat to Commitment appeared in a revised edition, Bartley and others, notably Gerard Radnitzky and Peter Munz were contributing a steady stream of papers to conferences and books. Bartley was at work on the parallel biographies of Popper and Hayek and oversighting a new collection of the complete works of Hayek for the University of Chicago Press.

It is now apparent that this was a false dawn. Bartley died tragically young in February of 1990 and this symbolised the fate of Popper’s ideas. In retrospect it seems that too much time was devoted to discussion of what were perceived to be Popper’s leading ideas (demarcation and anti-induction) and not enough to unpacking the implications of his major innovations, or “turns” as they can be called.

In Part Two Simkin is playing on his home ground, economics, which Popper considered to be the queen of the human or social sciences. This book was written while Popper’s ideas were still being actively discussed in connection with economics and it was not yet apparent how unhelpful that discussion would be for economists and for the understanding of Popper’s ideas.

Popper’s progress from the philosophy of science to politics and the social sciences.

After Popper published his revolutionary work in the philosophy of science (Logik der Forschung, 1935) he turned his attention to the social sciences, alarmed by the failure of the socialists and Marxists to provide an effective barrier to the rise of the Nazis, a failure that the attributed in part to the defective methods of the social sciences at large. Hacohen's intellectual biography tracked both his movements and the development of his ideas through successive drafts of The Poverty of Historicism and The Open Society and its Enemies.

In researching and writing these books Popper covered a huge amount of ground in areas outside his previous concerns in science, mathematics and the philosophy of science so he needed a robust structure to keep the material in order. The organising principle that he chose was the idea of historical determinism which he labelled “historicism” at a time when nobody else was using the term in English. Later this terminology caused confusion when the German term “historismus” (with a different meaning) was translated as historicism and in recent times there have been at least three different meanings of historicism in circulation.

As an added practical problem, the work was done mostly in his own time because his professor became hostile and considered that time spent on the book during working hours was stolen from the university were he was employed to teach. Library facilities were primitive (he grew up in a house with as many books as the stock in the Canterbury College library at that time). The war news was mostly bad during the early period of writing and the news from Austria was worse, with 14 of his relatives engulfed in the Holocaust.

Another complication arose from the way that the Open Society grew out of some notes that Popper prepared to provide some historical context for his section on Essentialism in The Poverty of Historicism. The notes grew into the 800 page OSE and The Poverty of Historicism was put aside to appear as three articles after OSE was in press in 1945/45, two decades before the book appeared in 1957.

Colin Simkin wrote a story about the writing of the Open Society, this appears as an appendix to this book.

CONTENTS

15. Critique of Historicist Views

16. Holistic Planning

17. Situational Logic

18. Piecemeal Planning

19. Individualism

20. Models and Individualism

21. Institutions and Traditions

22. The Role of History

23. An Application to Economics

24. Critical Economists

25. Relevance to Economics

Conclusion

Appendices

I. The Birth of The Open Society: a Personal Reminiscence

II. Popper and Hayek on Piecemeal Social Engineering

Ill. Advice to Russian Readers of The Open Society

Bibliography

15. CRITIQUE OF HISTORICIST VIEWS

“The main content of the two books which Popper wrote on the methodology of the social sciences is a comprehensive critique of what he called 'historicism' and the associated doctrine of holism. By that he meant 'an approach to the social sciences which assumes that historical prediction is their principal aim, and that it is attainable by discovering the "rhythms", or the "patterns", the "laws" or the "trends" that underlie the evolution of history.”

This project yielded positive results including the theory of situational logic in history and the institutional theory of progress, however Popper’s main purpose was critical and he attacked two sets of arguments; the “anti-naturalistic doctrines of historicism” and the “pro-naturalistic doctrines of historicism".

The scientifically optimistic “naturalists” believed in the methods of natural science, many inspired by Newton’s achievement in generating long-range predictions of the movement of the planets. The “anti-naturalists” argued that the methods of the natural sciences could not applied to the social or human sciences due the radically different nature of the subject matter.

Popper claimed that both parties misunderstood the methods of the natural sciences. In reply to the naturalists he explained the difference between prediction and prophecy, between laws and historical trends. Particular scientific laws can be used (with an account of initial conditions and other assumptions) to explain individual events but this form of explanation does not permit the prediction of trends over time. The valid form of prediction was explained by Mises (who served with the artillery in the war) with the example of calculating the penetrating power of a projectile. Popper used the example of calculating the strength of a wall required to withstand wind of a specified force.

The anti-naturalists invoke features of society such as radical novelty, complexity, problems of experimentation and social change as reasons to reject the methods of the natural sciences. Popper argued that these are differences of degree and the anti-naturalists promote difficulties to the level of impossibilities. Different methods are required in the human sciences, as different methods are used in different branches of the natural sciences, but Popper argued there is no call for a different logic of investigation or practical application.

The Open Society, in contrast with the criticism of largely abstract ideas in The Povety, is a study of some very influential political thinkers who Popper labeled “historicists”, - Plato, Aristotle, Hegel and Marx.

The first volume is concerned with the spell of Plato and the second, on Marx, is subtitled "the high tide of prophecy", a residue of his original concern with the myth of historical determinism.

In the first volume he first described the beginning of the myth of origin and destiny, then Plato's descriptive sociology (where he found a class analysis), then Plato's political program (with his theories of justice, leadership and social reform). Finally he examined the turbulent history of the time to explain why Plato was so desperately concerned to draft a blueprint for a stable state. The second volume starts with chapters on Aristotle and Hegel, then moves on to Marx's methods, and ends with chapters on the sociology of knowledge, rationality and the meaning of history (if any).

In some ways the reception of volume 1 has been distorted by the “historicist” label that Popper attached to Plato and there is a mass of literature that disputes Popper’s interpretation of Plato.

The gloss that I have put on Popper's work in this field (like that of Hayek) is that he is concerned with the critical review and reform of the rules of the game of social and political life. This is where Popper's ideas have direct application at present. In summary, The Open Society and its Enemies is a monumental defence of human freedom and dignity, and a demolition of many pervasive ideas that render our traditions of rationality and tolerance dangerously fragile under the pressure of social and political crises. Chief among these is the utopian impulse to recreate society in the image of someone's dreams. There is some debate as to whether Popper's dramatic view of science as a succession of revolutions is consistent with the relative conservatism of his political philosophy. In fact there is no conflict because both garments are cut from the same cloth of critical rationalism, the spirit of criticism, respect for arguments, for the truth and for the rights of individual people.

Colin Simkin noted that Plato’s ideas became profoundly influential through the classical type of education given to European clerics and gentlemen after the Renaissance. Whitehead famously described Western philosophy as footnotes to the works of Plato.

“Plato had depicted historical change as continuous social decay, and sought to arrest it by means of a republic ruled by wise guardians who had been specially trained to foster and preserve conservative harmony between classes, rigidly stratified on the basis of social function and non-hereditary. Aristotle developed a theory of essences from Plato's theory of ideas, and made essences identical with final causes, the end or purpose which is to be realized by change. In that way he substituted a dynamic optimism - a belief in progress - for Plato's pessimism about change, although Aristotle left it to others to apply his dynamic optimism to history. It was so applied by Hegel, whom Popper regards as 'the father of modern historicism and totalitarianism'."

16. HOLISTIC PLANNING

“Although holism is an empty theoretical programme it has had a strong influence on notions of social planning. Consistent with their view that social phenomena can be understood only as a whole, holists maintains that society can be changed or reformed only as a whole. This idea, too, goes back to Plato who, seeing change only as decay, wished to prevent it by a whole- sale transformation of socio-political conditions. An important, if indirect, stimulus was given to the idea of holistic planning by Descartes whose emphasis on reason as a guiding principle undermined an older idea of natural law as resulting from custom and tradition. It is not, then, surprising that the French Enlightenment and the French Revolution led to a variety of proposals for wholesale social change, usually along the socialist lines advocated by such theorists as Saint Simon, Fourier and Proudhon.”

Proposals for the large scale and radical reconstruction and planning of society were the stuff of progressive thinking through the late nineteenth century and up to the present time. Marx himself had no time for “utopian planning”; he was more interested in the tide of history but still central planning was the hallmark of the regimes that sought and sometimes achieved power in his name.

“These founders of dialectical materialism believed that social change must result from inexorable historical laws, not from the plans of reformers, however rational or radical. Such plans could only distract the working class from its historical task of revolution. Nevertheless wholesale or collectivist economic planning was instituted in Soviet Russia, whether by historical necessity or by Stalinist dictatorship…Very soon after the First World War ended, there was vigorous discussion of economic planning in both Germany and Austria.”

Popper was fully exposed to these ideas during his early engagement with the communist and socialist movements that recruited many people of his generation. He rejected the more radical aspects of the movement when he realised that the claims and ambitions of the reformers were far beyond their understanding and especially when he realised that for many leaders of the radical movement the party was a vehicle for their personal ambitions to achieve power.

He was not opposed to planned reforms, the point was to apply the critical method to learn from mistakes and minimise the harm done by bad decisions (and bad leaders).

“His condemnation of holistic planning was both practical and moral. On the practical side, he pointed out that there is no scientific basis for holistic planning. It is a far bigger and much more complicated problem than any physical engineering…so that the intended aims of planners are likely to be thwarted by large, unforeseen and undesired consequences of the changes which result from attempts to execute their plans.”

On the moral side, central planning represents a threat to individual liberty which could only be justified by extreme circumstances (such as times of war) and by the clear likelihood of success, otherwise the short-term suffering would be in vain and persistence in folly would only make things worse. And so “piecemeal social engineering” became one of Popper’s signature ideas (in the worlds of Ian Jarvie). This is explained further in chapter 18.

Simkin pointed out that Popper's critique of central planning was written before communists were in charge of Eastern Europe, China, and some other nations. It was four decades before the Fall of the Wall and the subsequent attempts that were made to change direction. “Although Popper's writings had little if any direct influence on these changes, the course of events can be seen as corroborating his analysis”.

17. SITUATIONAL LOGIC

Simkin noted that ever since Newton's brilliant success in explaining physical phenomena there have been attempts to discover basic laws for social phenomena. Saint Simon, the original European socialist, proposed that all sciences, social as well as natural, should seek their basis in Newton's law of gravitation. Adam Smith had a keen interest in Newton's methods and may have aspired to produce a system of comparable scope and explanatory power to demonstrate the connections between markets, morals and the legal system (see Nicholas Phillipson, Adam Smith, Allen Lane, 2010).

"Comte, generally regarded as the founder of sociology, looked rather to biology for 'static' laws of coexistence and 'dynamic' laws of succession in his new science. This idea had great influence in France and also in Germany where it was taken up by the Young Hegelians. Comte also influenced some English thinkers, notably Carlyle and J.S. Mill."

Mill, being a resolute individualist, rejected the collectivism of the French and Germans and looked to psychology as the basis of the moral and political sciences. He wrote one of the classic works in political economy but despite his interest in psychology he did not translate this into a subjective theory of value and he persisted with the labour theory.

"Menger, an independent discoverer of the marginal utility [subjective value] theory and the founder of the Austrian subjectivist school of economics, was far from holding that psychology could furnish historical laws of economic development, He and his followers rather emphasized the purposive character of individual activity, its dependence on subjective valuations, knowledge and expectations, and the central problem of the unintended consequences of individual actions."

The Austrians also insisted on methodological invididualism and Popper (an Austrian) followed both Mill and his countrymen in this respect, although he rejected Mill's psychologism.

"He reduced psychological considerations to the simplification of a rationality principle, 'the principle of acting appropriately to the situation; clearly an almost empty principle'. He stresses that it has little to do with any psychological assertion that people always act rationally. Rather it is a consequence of his methodological postulate that we should, as far as possible, try to explain social phenomena in terms of the objective features of a situation, features which include the objective aspects of human aims and expectations, not the ways in which these are diversely generated in individual minds."

This rationality principle is a heuristic, a methodological postulate, not a law or a testable hypothesis. "Nor is it to be regarded as a prioiri valid as some Austrian economists, notably Mises, would have asserted."

There are four reasons for adopting this methodological postulate.

(i) Models of an objective social situation are more informative and testable than is the rationality principle; it is almost empty and false so that testing it would not tell us anything new.

(ii) Theories can be tested only as a whole, and a test involves choice between alternative theories; most social theories of any merit would have this rationality principle in common, implicitly if not explicitly.

(iii) Attempts at replacing the principle seem to lead to complete arbitrariness in modelling social situations.

(iv) Adoption of the postulate can lead to deeper analysis of what is relevant in a social situation or structure.

There is a potentially similar function of models in physics and the social sciences.

In physics the model states a set of conditions (the position of a planet in the solar system), plus a driving force (the universal laws of mechanics) and the result is the observed movement of the planet.

In the social world the model states a set of conditions (an array of goods in the marketplace or the disposition of forces in a battle) plus a driving force (the rationality principle) and the result is the observed actions of the shoppers (or entrepreneurs) and the generals directing the forces.

"That is why Popper offers his almost empty rationality principle. It is a general substitute for the universal laws which social science has had such difficulty in finding. Social models are discussed in Chapter 23."

Later in the chapter Simkin commented "Theoretical models can be used in both types of science. All that is different is the use of the rationality principle to drive the situational models of social science instead of the many laws, causal or probabilistic, which can be invoked to drive the models of natural science."

Simkin notes that Popper in The Poverty of Historicism affirmed the unity of method between natural science and social science, asserted that there are universal social laws, and offered some examples: 'you cannot introduce agricultural tariffs and at the same time reduce the cost of living', and 'you cannot introduce a political reform without strengthening the opposing forces, to a degree roughly in ratio to the scope of the reform'.

Simkin was unimpressed with the examples and Popper later decided that there were no laws in the social sciences because everything that he postulated as a law had exceptions.

[I received verbal reports from Popper and a student (on separate occasions) that this negative decison was the outcome of their efforts to identify sociological laws. I hope there is some documentation for this in the Popper archives.]

So when Popper gave up the idea of universal laws in the human sciences he turned to Situational Analysis and the Rationality Priniciple to produce something like the "pattern predictions" that Hayek regarded as the kind of predictions that are possible in the social sciences. This type of causation and prediction is remarkable similar to the use of "propensities" that Popper postulated in place of deterministic laws in his later work in physics.

Getting back to Simkin.

"The lack of universal laws, invariant over space and time, does not itself mean that social phenomena cannot be given scientific explanation. A scientific theory is a tentative, criticizable and testable explanation of the relations between empirical phenomena, and we have seen that a model can serve this purpose, given some driving force...We have to accept rougher explanations than those which scientific laws make possible. Social models are necessarily rough approximations to truth because, even if theoretically polished or technically sophisticated, they are schematic oversimplifications of objective social situations. We could not represent anything like the full complexity of such a situation by a model, and so have to attempt a selection of its more relevant and general features for mapping. For this reason, and also because the rationality principle is only an approximation, Popper points out that tests of social models are usually neither clear-cut nor easy to obtain."

[All of those qualifications and complications apply to models in the physics and the biological sciences.]

"The idea of situational logic came to Popper from marginal utility economics which Menger had helped to pioneer. It is not surprising that others who were influenced by Menger's school had a somewhat similar idea. This is particularly evident in the work of Max Weber. He saw that, although Menger's school stressed subjective phenomena, it had nothing to do with experimental psychology but was rather 'pragmatic' in the sense of using the categories of ends and means. This points to some agreement [in advance!] with Popper's rationality principle".

It seems that Weber anticipated what Popper called "the zero method" of economic analysis. Weber referred to the "ideal type" of an economically rational act:

"by the construction of a purely rational course of action...By comparison with this it is possible to understand the ways in which actual action is influenced by irrational factors of all sorts...in that they account for the line of conduct that would be expected on the hypothesis that the action were purely rational." cited by Parsons in Essays in Sociological Theory, Free Press, 1949, p 76.

Compare with Popper:

"By the zero method I mean the method of constructing a model on the assumption of complete rationality (and also perhaps on the assumption of the possession of complete information) on the parts of all the individuals concerned, and of estimating the deviation of the actual behaviour of people from the model behaviour, using the latter as a kind of zero coordinate" (The Poverty, p 141).

Simkin referred to the influence of the economists Marshall and Pareto on Talcott Parsons in developing his "rather opaque accounts" of 'voluntary social action'. He noted that Hayek also developed something like it from the ideas of Menger and Mises, although "in a way that was more polemical than constructive" and he reported that some of Popper's philosophical colleagues - Agassi, Jarvie, Watkins and Wisdom - discussed situational logic but "either in a polemical context or very briefly."

"Jarvie himself points out that Popper's analysis of Plato's law of decay, and of Marx's theory of class struggle, in The Open Society, can be interpreted as early, applications of the method of situational logic. He also cites examples of situational analysis in non-economic fields; Moynihan's work on Negro riots, Davis' work on prostitution and Evans-Pritchard's work on Azande witchcraft".

This may be a suitable place to note the remarkable similarity of the explanatory models developed by Parsons, von Mises and Popper during the 1930s (all heavily influenced, directly or indirectly by Karl Menter and Max Weber) and the equally remarkable failure of the three masters and their apprentices to enter into any kind of discussion to build on their similiarities and explore their differences.

18. PIECEMEAL PLANNING

“Popper advocates 'social engineering' as the practical aim of social science, - the shaping or creation of social institutions in order to achieve or promote desired improvements to social conditions. He has also distinguished between two types of social engineering, 'holistic', utopian or collectivist planning, of which, as we have seen, he strongly disapproves, and 'piecemeal' planning, of which he strongly approves. The one attempts the impossible task of remoulding society in accordance with a complete social blueprint, the other attempts in any time only as many reforms as can be properly monitored and as do not impair democratic institutions.”

This chapter provides a good account of Popper’s position which is really very much a matter of common sense except that many millions of lives have been ruined in the cause of radical reconstruction driven by various versions of utopian thinking in their communist and fascist manifestations. Possibly the best short explanation of Popper’s views on this topic, apart from this chapter by Simkin, is Chapter 9 of The Open Society.

Simkin stands with Popper in favour of the kind of reforms driven by social democrats since the Industrial Revolution and against laissez faire which he perceives to be the agenda of the modern Austrian economists led by Ludwig von Mises. It is most unfortunate that von Mises confused the issue by lambasting social engineering without mentioning that Popper’s piecemeal engineering is not vulnerable to his attack, indeed von Mises himself practiced piecemeal engineering daily for many years when he was a leading advisor to the Austrian government during the 1920s.

The key features of Popperian engineering are (a) close attention to the actual results of the reforms and (b) public discussion to identify failures and to consider the alternative strategies to address the problem.

“Democratic institutions, accordingly, are needed for scientific as well as for ethical reasons. Popper agrees, therefore, with Marx and Engels in condemning utopian planning, and with Mises and Hayek in condemning collectivist planning. But he disagrees with the communists' view that piecemeal reform is impossible…He also disagrees with the Austrians' view that the remedy for social evils should be left as much as possible to market forces. Popper sets no limit either to state participation in piecemeal social engineering nor to the scope of this engineering, provided that it does not threaten democracy and that it satisfies his criteria of a trial and error procedure, together with free criticism of ends and means.”

Simkin reminds us that Popper has been widely criticised for being too modest in his aspirations for piecemeal reform, to which his answer is that he set no limits in the medium term because many advances have been achieved that would have been regarded as utopian a generation or two ago.

“Lord Boyle tempered his generous appreciation of Popper's work with a criticism of what he took to be a limited view of the scope for piecemeal social engineering. The weakest point, he thought, was Popper's presupposition that the sole purpose of engineering should be to eliminate avoidable evils. He agrees that there are no institutional means of making anyone happy, but asks whether there are not such means for increasing possibilities of happiness, as the American Declaration of Independence stated.”

Similarly, from a more radical stance, the Frankfurt School of libertarian Marxists saw Popper's piecemeal social engineering as manipulating people in order to preserve capitalist society.

“In their view, liberation of the people from capitalist manipulation required a holistic reconstruction of society, to be achieved if necessary by revolution…Popper, of course, would regard that as a recipe for tyranny rather than liberation. Natural science, he thinks, has developed very largely through a piecemeal concern with practical problems. For, in dealing with practical problems of an engineering kind, natural science has exposed theoretical problems of great significance.”

He was sure that the social sciences would develop usefully in the same way. The technological approach to social problems not only helps to identify problems, it calls for practical tests rather than metaphysical speculation. Simkin recalled some comments on scientific research by Medawar (a Nobel Prizewinner in medicine) 'to start with a concrete problem, but then to allow the research to open out in the direction of greater generality so that the more particular and special discoveries can be made to rank as theorems derived from statements of higher explanatory value'.

19. INDIVIDUALISM

This chapter is about methodological individualism (MI), that is a mode of explanation in the social sciences, not political individualism (about the priority of individual rights versus the collective) or ontological individualism (individuals are “real” but wholes and collectives are constructs).

Simkin notes the two methodological views:

“Methodological collectivism takes the important social phenomena to be groups or collectives because it attributes to them needs, purposes, functions or causal influences which transcend those of the individuals who belong to them.”

“Methodological individualism takes the basic social phenomena to be the activities of individuals together with the institutions and traditions which influence their aims and connect their activities.”

Popper advocated MI following the Scottish school of political economy (Smith, Ferguson, Hume) and the more recent Austrians (Menger, von Mises, Hayek, Dunbar).

Including institutions and traditions in the picture has raised eyebrows among the opponents of MI, as though MI is not supposed to take account of these “social” or “collective” entities. Joe Agassi clarified the situation with a more fully worked out version of Popper’s position that he called “Situational or Institutional Individualism”.

Popper explained his position as an alternative to the reduction of social events to individual psychology, an error that he called “psychologism” and attributed to J S Mill.

“Popper emphasizes that his own method of situational logic is not a psychological but a logical method, and that the human or personal factor will remain the irrational element in most, if not all, institutional theories”.

Simkin pointed out that Popper’s position is very close to that of Carl Menger, indeed one of the few sources cited in The Poverty of Historicism is the collected papers of Menger.

“Menger had a firm grasp of methodological individualism or, as he usually called it, the 'atomistic', or 'compositive' method of analysis, and it seems likely that his views influenced Popper, if only in an indirect way… he took his task to be finding laws for such activity based on the simplest 'typical' elements…Thus 'we reduce human phenomena to their most original and simplest constitutive elements', and then 'investigate the manner in which more complex economic phenomena evolve from their elements according to definite principles'. Like Popper, Menger also condemned historicism, holism and organicism.”

“Popper subscribes to individualism, both as a methodological principle and as an ethical postulate…Popper also takes moral issues very seriously, more seriously even than intellectual issues, but he is reticent about making ethical pronouncements because he thinks 'so much of the talk about values is just hot air’."

20. MODELS AND INDIVIDUALISM

“Criticisms have been made of Popper's insistence on methodological individualism. Blaug, for example, after mistakenly accusing him of muddling economic and political liberalism. He goes on to assert that exclusive adoption of this principle would rule out macro-economics so that there must be something wrong with it….Ryan has questioned why Popper calls this principle methodological individualism since he allows it to include the situations in which individuals find themselves and also interrelations between them.”

Simkin cleared up some confusion by spelling out Popper’s thoughts on the role of models in explaining social phenomena. This work did not feature in the prolonged debate about Popperian “falsificationism” in the philosophy of economics literature due to Popper’s eccentric publication program. Demonstrating yet again that truth can be stranger than fiction, Popper delivered a talk on models and social explanation at Harvard in 1963. A short version of the paper appeared in a French journal some years later, and this or a version of it appeared in A Pocket Popper (1967) titled “The Rationality Principle”. A short and a long form of the paper circulated among Popper’s friends and relations until it turned up in the 1994 collection The Myth of the Fremework, edited by M A Notturno. This has aroused some comment, mostly adverse, because it raises as many issues as it solves.

Simkin’s exposition comes from “The Rationality Principle” because that could be cited and Notturno’s collection was not in print at the time.

“This explained that a social model would include among its typical initial conditions:

(ii) some institutions and their properties (e.g. laws, markets and money);

(iii) some aims of people (e.g. maximization of utility, profits, or wealth);

(iv) some elements of knowledge available to people (e.g. technology, market prices, or taxes); to which could well be added

(v) some expectations which people hold about future social conditions (e.g. about war, unemployment, inflation or exchange rates).”

Using the language of the three worlds, physical conditions belong to World 1, aims and expectations to World 2, and both institutions and knowledge to World 3. Institutions coordinate or interrelate the activities of individuals in attempting to realize their aims subject to the limitations imposed by the physical environment and by the institutions themselves.

Simkin conceded that Blaug's question about macroeconomics is a challenge and he noted that the Austrian School of economists, whose work inspired Popper's situational models, had severe reservations about macro-type analysis, at least in the form conducted by Keynesians (and econometrics).

Simkin himself was a macroeconomist and a mathematical economist as well. When he first met Popper in 1938 he was an enthusiast for the “middle road” of the Scandanavian welfare state and he was encouraged by Popper to persist with the mathematical approach because Popper thought that economics had turned the corner with the mathematical approach that he heard from the mouths of the masters in the Menger and Richard von Mises seminars in Vienna. Simkin was also encourage on that path by lifelong friendship with the Nobel Prizewinner and mathematician John Hicks (a friendship close enough for Simkin and his wife to be a regular house guests with the Hicks family during visits to Britain).

Simkin pointed out that there are major obstacles in macroeconomic work.

“Statistical measures of macro variables are often so difficult and expensive to collect that economists have to rely on measurements made by governmental agencies, and hence subject to administrative or fiscal considerations which, along with imperfections of data collection, can cause marked divergences of these measures from the theoretical concepts which they are taken to represent. For both sets of reasons, the imprecision of a macro measurement is likely to increase with the degree of its aggregation. Other aspects of generalizing individual activity in society do not involve measurement so much as selection - the selection of typical aims, expectations and situations. Objective indications of aims and expectations can sometimes be obtained from such published sources as articles of association and prospectuses of companies, constitutions of trade unions and friendly societies, legislation covering these or instituting public agencies, and from the formal, periodical reports of such bodies. But in the case of individuals, as distinct from formal associations of individuals, there is little but guesswork to determine their aims and expectations although sampling surveys of consumer or business sentiment throw some light. In any case, the published aims and expectations may be vague and incomplete, and individuals will have many and partly diverse aims and expectations. Theorists have, accordingly, to postulate, as best they can, a manageably small number of aims and expectations which they take to be typical for the group that they are analysing, and to revise the postulate as tests of their theories indicate that this is, needed.”

Simkin concluded that “notwithstanding the difficulties of macro analysis, and those of providing satisfactory micro foundations for macroeconomics, Popper's insistence on methodological individualism is sound and that, contrary to Blaug's assertion, it does not make the impossible demand of excluding all macro concepts or analyses. It only insists that these must always be related, so far as possible, to the aims, activities and valuations of individuals and never given an independent life of their own.”

21. INSTITUTIONS AND TRADITIONS

Popper regarded institutions and traditions as closely related in their function of providing continuity and a degree of predictability in social life. They can be regarded as the longitudinal threads in the carpet or tapestry of life.

Simkin wrote that “Traditions are closer to individuals than institutions are, and can have an important role in ensuring that institutions function as they are supposed to do. For example traditions of honesty and fair dealing may lead a government department to avoid corruption among its members, or else lead to effective demands from politicians or citizens that the bureaucrats mend their ways.”

“Traditions are thus needed as a kind of link between institutions and the values and hopes of individuals. They are precious and, like institutions, cannot be taken for granted. Europe lost the tradition of science so brilliantly begun in Ancient Greece, and did not revive it until the Renaissance. This does not mean that traditions or institutions are sacrosanct. They rather resemble scientific theories in being open to critical examination, empirical testing, correction and innovation. But they should not be changed until their functions, and so the consequences of their loss, are well enough understood.”

Simkin also noted Popper’s point about the ambivalence of social institutions, so a police force or an army may terrorise the people rather than protecting them. Merton referred to this phenomenon as the “manifest” and “latent” function of institutions. Another example is the professionalisation of occupations, such as the philosophy of science, so the manifest or prima facie function of the professional association is to promote scholarship but a latent or collateral function may be to create a rigid “guild mentality” that cramps original work.

Simkin referred to the state as the paramount institution with an important supportive role in relation to other institutions, especially the police and the courts in the interests of civil order, the rule of law and property rights. Popper always pointed out the danger of state power that needs to be restrained by checks and balances, and the liberal tradition of suspicion of all concentrations of power and authority. Popper was in favour of certain kinds of state intervention, but with significant caveats, and given more economic literacy his position would have probably come close to the dreaded Austrians. He detested discretionary powers, and he insisted on the need to limit intervention to modifications of general rules rather than giving out orders.

“Government intervention in economic life may take two forms. One form is the creation of a protective framework of laws to prevent undesirable activities or to assist the development of desirable activities. Examples are labour laws to protect workers against bad working conditions, banking laws to protect depositors against loss of their money, or anti-monopoly laws to foster competition. The other form of intervention is much more direct, giving power to some state agencies to act, within certain limits, as they consider necessary for achieving specific purposes of legislation. Examples are licensing authorities for industrial or trading activities, wartime direction of labour, or foreign exchange controls. Popper, as a democrat, favours use of the first form of intervention rather than the second.”

The examples given by Simkin would be hotly debated in liberal circles and it is safer to stay with controls on force and fraud, and road rules (for example).

Simkin moved on to Popper’s theory of institutional progress, something that he did not develop, though he was effectively advocating the kind of work on the role of legal institutions that won a Nobel Prize for Douglas North. Jarvie picked up this thread of Popper’s work and described it as a part of Popper’s “social turn”.

“Popper concludes his Poverty of Historicism by sketching an institutional theory of scientific and industrial progress as a superior alternative to the psychologistic and historicist theory by which Comte and Mill attempted to explain this most striking development of modern times. Their explanation ran in terms of 'the progressiveness of the human mind' impelled by 'the desire of increased material comfort'. Popper sees two weaknesses in their explanation. One is that it neglects other qualities of the human mind, such as forgetfulness and laziness, which could equally well be invoked to explain economic decline and no doubt would have been had this happened. The other is that it completely neglects the social environment of institutions and technology.”

The chapter ends with a reference to Popper’s critique of the early forms of the sociology of knowledge that he perceived in the 1930s and 1940s. He was alert to the way that the rational and critical standards of intellectual activity were under threat from “socio-analysis” which attempted to explain ideas in terms of interests and ideology rather than their truth or problem-solving capacity.

“The objectivity of science is thus not a matter of individual or group psychology but one of inter-subjective criticism and testing until a provisional consensus is reached about the acceptability of a theory or any test of it. Social science, admittedly, has lagged much behind natural science in these respects, but this situation could improve with the further development of intellectual traditions and institutions within social science.”

22. THE ROLE OF HISTORY

"As economics pushes beyond statics it becomes less like science, and more like history." John Hicks

This chapter contains more about situational analysis than history. One might have expected a recapitulation of chapter 25 in The Open Society on the role of narratives in selecting the facts that are provided in historical accounts or the importance of studying the history of problem situations that Popper emphasised in the Preface to The Logic of Scientific Discovery.

After some references to the problems of getting past “statics” in economics to take account of dynamic processes (without mention of the entrepreneur) Simkin returns to situational analysis.

“Popper thinks that historians have often made more or less conscious use of 'the logic of situations' for historical explanation. He finds himself in agreement with R.G. Collingwood on this point, although disagreeing with his method of subjective reenactment; for Collingwood emphasized that understanding a historical event required analysis of a situation and how it might be dealt with. Popper holds that there is a further need for 'an analysis of social movements', based on methodological individualism. It would be an analysis 'of the social institutions through which ideas may spread and captivate individuals, of the way in which new traditions may be created, and of the way in which traditions work and break down.”

“Popper advocates more detailed analysis of the logic of situations, such as the best historians have used, more or less unconsciously. 'We need studies', he says, based on methodological individualism, of the social institutions through which ideas may spread and captivate individuals, of the way in which new traditions may be created, and of the way in which traditions work and break down'. This means that individualistic and institutional models of collective entities, such as nations, governments and markets, 'will have to be supplemented by models of political situations as well as of social movements such as scientific and industrial progress.' Historians could use such models to analyse and explain the problems which interest them’."

23. AN APPLICATION TO ECONOMICS

This chapter and the next two – Critical Economists and Relevance to Economists should be the best part of the book where Simkin makes the most of his understanding of Popper’s ideas and economics to explain how the twain should meet. He provides some good examples to show how the Popper’s ideas have been mangled and misrepresented in the literature on the philosophy of economics. This has happened despite the best efforts of Larry Boland over a whole career to provide a straight feed on Popper’s relevance to economists. Boland does not appear in the Bibliography although he had half a dozen books in print by the time this book went to press. Nor is there a reference to the work of Stanley Wong, Boland’s student, who wrote a brilliant critique of Samuelson’s work on revealed preferences, using of the full battery of Popperian artillery including metaphysical research programs and situational analysis. Jack Birner has also done good work on Popper and the Austrians.

“One of the few attempts, and the most serious one, to discuss the application of Popper's methodological ideas to economics is that of Spiro Latsis. Unfortunately his discussion is cast in the framework of Lakatos' methodology of 'scientific research programmes', which Popper regards as a travesty of his own ideas.”

It was Latsis and Blaug who led the procession into the dead end where the philosophers of economics played around with the ideas of Lakatos and Kuhn for two or three decades, making little contribution to philosophy or economics in the process.

Latsis not only wrote the papers and the book that introduced Latatos to the economists, his father funded two lavish conferences in the Greek islands to pursue these matters in style and comfort. Latsis the elder was a shipping magnate and young Spiro has now taken possession of the empire. His fortune is worth about US$10 Billion (that used to be real money) and in 2006 he ranked 51st on the Forbes Billionaires list.

Simkin reports that Latsis made an acute analysis of economic methodologies for explaining business behaviour, and raised some problems with the rationality principle. He described the 'neo-classical programme of situational determinism' which covers perfect and imperfect competition, oligopoly, duopoly and perfect monopoly. This uses a 'hard core' of common assumptions supplemented by sets of auxiliary assumptions which vary with the market situations considered. Latsis insisted on the need for a psychological explanation of the 'bridge' between perception and execution, even allowing for irrational beliefs.

“Ignoring what Popper has said about institutions and traditions, Latsis asks why we should not go further by allowing unconscious motives to be part of the situation. He proceeds to examine alternative ways of analysing business behaviour which are not anti-psychologistic referring to Simon, Baumol, Quandt, Cyert and March as pioneers of this approach,”

Still, it seems that this approach did not lead to new results. Simkin quoted Latsis:

“One sees a maze of low level generalization guided mostly by commonsense psychological considerations and growing chaotically in different directions. No real hard core or comprehensive positive heuristic has emerged.”

Simkin notes that this is consonant with Popper's view that the attempt to replace the rationality principle by another one seems to lead to complete arbitrariness in our model building.

“Latsis criticizes a particular application of Popper's situational analysis, and without reference to his development of that into a theory of explanatory models (although he must have been aware of it, judging from the bibliography which he gives). Latsis, like others, shows that this particular application has faults, but he does not consider whether a better Popperian model could be devised to explain the behaviour of markets.”

24. CRITICAL ECONOMISTS

“Curiously, however, the symposiasts in Amsterdam were not taken with the idea of seeing how much of Popper could be retained, but spent a great deal of time discussing - inconclusively - the need for and possible alternatives to Popper's demarcation criterion. This preference may reflect the current confusion about standards.” Neil de Marchi

“This quotation is taken from the introduction to a recent book, The Popperian Legacy in Economics (eds De Marchi and Blaug), which records papers and discussion at a symposium of ten economists and one philosopher held in Amsterdam during December 1985 to mark the retirement of Professor Kiant, who had written much on economic methodology. This book, accordingly, may be taken to represent up-to-date criticisms of Popper's methodology in regard to its relevance to economics but, as the quotation indicates, the criticisms were narrow and most of them related to Popper's earlier work on methodology, notably his criterion of falsifiability, and neglecting his later contributions, notably models and situational analysis neither of which finds mention in the book's index.”

Jack Birner attended the conference and described it as a sustained exercise in Popper-bashing. Boland was not invited to participate. This was not the only occasion of his “ disinvitation” to a meeting where he would have added value, this absurd situation was replicated at a conference on Friedman’s famous 1953 paper, on which Boland wrote one of the very few useful commentaries.

Klant's paper made the basic point about the impossibility of decisive empirical tests (as though this is a problem for Popper) and that was developed more fully by the philosopher Hausman who claimed that “Popper's philosophy of science is in a mess”, followed by some confused arguments which do not damage Popper’s position.

As Simkin noted, the debate really has to move on from the issue of demarcation to test the value of Popper’s later ideas. There is also a need for more case histories (like Wong on Samuelson) to explore how different methods can be used to handle live issues in the field. It is hard to say how much Popper is personally responsible for the over-emphasis on demarcation because he did not engage with the subject matter of economics sufficiently to demonstrate how his ideas would work.

Boland recently made the point that there is need for more critical discussion of actual theories rather than rival definitions of science, as though the value of scientific theories can be decided by decisions on methods. When the focus is on rival theories then the important criteria, in addition to truth, will be explanatory power, predictive power, the capacity to stand up to all kinds of criticism, including tests, the capacity to integrate different fields of research and the capacity to generate a fruitful research program.

After demolishing Hausman’s contribution Simkin reported:

“Other contributions to this book can be considered more briefly and some neglected as irrelevant to Popper's views. Hands gives an acceptable account of Popper's use of the term 'ad hocness' to characterize theories which add one or more auxiliary hypotheses in order to rescue a theory from refutation without thereby adding to its predictive range…Hutchison, an early supporter of Popper, devoted much of his paper to Sir John Hicks, who was not a Popperian. He quotes Hicks' comment that much of economic theory is a good game, and deploringly finds that there has been a strong tendency for economic theory to become removed both from realism and intelligibility by other than its specialists...”

25. RELEVANCE TO ECONOMICS

“Popper's methodological ideas for economics go well beyond the falsificationism which so absorbed the Amsterdam symposium, and here I offer my understanding of them. But I would first point out again, and give an explanation for, an important change in his thinking because it bears on whether economics should, as some have thought, attempt to emulate physical science. Social sciences do not have any generally accepted scientific laws.”

The last proposition is arguable but I will not break the flow of Simkin’s narrative at this point.

"Popper, when he wrote The Poverty of Historicism, had also thought there were some causal laws in social science but the examples he gave were both trite and unconvincing. He has since come to agree with the view of, Wicksell, Hayek, Hicks and Samuelson that economics lacks causal laws. In a later recommendation that social sciences use models, Popper argued that these should be driven, not by causal laws as in classical physics, but by an almost empty rationality principle."

Simkin considered probabilistic laws, given that the social sciences make considerable use of statistical data and statistical methods. “If they lack strictly causal laws can they not, like statistical or quantum mechanics, have probabilistic laws?” The examples that he considered include the statistical distributions of heigiht, intelligence and income but he pointed out that such distributions do not become interesting from a theoretical point of view until explanations for the observed patterns are suggested. That has not prevented a great deal of statistical acumen being invested in more or less clever curve-fitting exercises.

“A fit may be regarded as satisfactory if it passes a Chi-square test, which itself depends on the deviations from a fit being independent random variables that are asymptotically normally distributed. There are, of course, complications and problems here. They are passed over because what is to be emphasized is that the 'explanation' of a fitted curve has been transferred to that of a theoretical distribution which is derived from the abstract probability calculus. It is not, therefore, a social explanation or law…Attempts at quantitative explanation in terms of social influences was at first attempted by applying multiregression analysis to a single equation which expressed a dependent variable in terms of a number of dependent variables which were thought to influence it but not one another.”

Followed by several paras on the statistical efforts that have been made to extract something of scientific value from massed data using various kinds of regression models and cognate econometric devices. The problem is that Simkin himself was hostage to this approach, partly due to the encouragement that the received from Popper and later from Hicks to persist with mathematical macro modeling.

“All this early econometric work made use of the statistical method of least squares regression, and tested the results with reference to the economic theory to which it was trying to give quantitative expression, and from which the only guidance was in regard to choice of explanatory variables and the signs of the parameters attaching to these variables. Probabilistic influences, at this time, appeared only in the assumptions required for the application of least squares regression. Its property of minimum variance for errors (differences between actual values of the dependent variable and those estimated from the equation) requires that the equation is correctly specified, that the explanatory variables have no correlation with one another, and that the errors have zero mean, constant variance and zero covariances. But it took some time before statistical tests of such assumptions were well developed and applied.”

[At that point the question shifts to what could achieved with the models after all those conditions were met, and indeed if they could be met in real-world situations.]

“At the same time use was made of Trygve Haalvemo's 'probability approach to econometrics', published in 1944. It called for mutual adjustments of theory and data by proper experimental design, and for the formulation of theories to include stochastic terms so that they are expressed in probabilistic form in order to avoid all too easy falsification by the data. Neyman-Pearson testing methods were also to be used in order to exclude theories which failed statistical tests. Then came the development of other methods of estimation than ordinary least squares; - indirect least squares, full information and limited information maximum likelihood estimation, two and three-stage least squares, generalized least squares, etc. Concomitantly there was work on the problem of identification - of ensuring that a model is in such a form as to lead to unique estimates of all its parameters from sample data when an appropriate method of regression is chosen. Notwithstanding much impressive and sophisticated work on econometric methods there are basic difficulties which limit the value of their applications.”

After several paras describing all the difficulties with data, and the changing circumstances etc etc It is possible to sympathise with a comment by Keynes when he wrote that econometric estimates were uninteresting because 'we know beforehand that they will not be applicable to future cases'.

It seems that this chapter ends on a downbeat note, although Simkin managed to find some success stories to save the day, though he did not explain how econometrics and statistical analysis contributed to the success.

“Scepticism goes much too far if it holds that economists have had no luck in understanding the complex phenomena which they try to explain, even if, at a general level, that has not got much beyond gaining new insights, learning useful practical lessons, forging analytical tools or developing econometric techniques. At a piecemeal level, there have been many fairly successful results; for example, control of inflation in Western Germany, development of new industries in Singapore, efficient coping with the 1974 energy crisis by South Korea, quick and successful adjustment of Japanese industry to a sudden and large appreciation of the yen after the Plaza Accord of 1985, free trade zones to promote exports in Taiwan, or measures to keep unemployment low in Sweden.”

CONCLUSION

“I should be inclined to regard my emphasis on criticism (or the doctrines of critical realism or critical optimism) as being more appropriate than indeterminism is to the unity of my theoretical and practical thinking.”

Karl Popper

“This is Karl Popper's response to John Watkin's account of 'The Unity of Popper's Thought' in The Philosophy of Karl Popper, although he acknowledges that 'Watkins has made out a brilliant case for his way of looking at the matter', and that it brings 'a notable degree of coherence' to his philosophy.”

Bartley summed up Popper’s basic theme in the proposition that “something can come out of nothing” and Miller opted for the theme that “in the realm of errors cure is more important than prevention”.

“There are, then, these two unifying strands to Popper's thought, critical rationalism being more prominent in his earlier work and indeterminism more prominent later with the development of his ideas about evolution and propensities, but both strands were always there and intertwined in a mutually reinforcing way. A physically evolving universe, a biologically evolving world, evolutionary epistemology, social and scientific evolution are all aspects of a basic indeterminism, but so important that they should perhaps, be given coordinate stress. The same holds for fallibilism, conjecture and refutation, and world 3 in regard to critical rationalism.”

For what it is worth, I see two ways to sum up Popper’s achievement. One is to list the “turns” or changes of direction that he introduced, starting in 1935, in addition to the critical approach. That is not a novelty by itself but it becomes a revolutionary innovation when linked to (1) the conjectural or non-justificationist turn, (2) the objectivist turn, (3) the social turn and (4) the metaphysical turn. Key figures in elaborating those turns were Miller and Bartley (on non-justificationism), Jarvie and Agassi (on the social turn) and Watkins and Agassi (on metaphysics). For more on these turns.

The second way to capsulate Popper’s work is note his attention to “the rules of the game”. This can be seen as a point of comparison with Wittgenstein although in my opinion Wittgenstein and his cohorts dropped the ball. This points up a common factor in Popper’s philosophy of science and his philosophy of politics. His approach to scientific method can be seen as a critical analysis and a search for conventions, rules and institutions that promote criticism and the growth of knowledge. In politics and social life the aim is to identify, formulate, test and improve the rules, traditions, conventions, laws, institutions etc to promote peace, freedom and prosperity.

APPENDIX ONE

THE BIRTH OF THE OPEN SOCIETY: A PERSONAL REMINISCENCE

Simkin wrote a charming memoire to recall his contact with Popper when the great man was working on The Poverty of Historicism and The Open Society and its Enemies.

"The most remarkable things about The Open Society were the unfavourable circumstances for research, and difficulty in getting it published. Gombrich has written his recollections of the publishing stage."

"Here I will only note some of the personal aspects of this remarkable and fortunate friendship."

“Early in the following year [1939] I came to Christchurch as the only lecturer in economics, and very soon was visited by Karl Popper who charmingly introduced himself and asked for help such as Larsen had given him. As he put it, his English was bad and he was ignorant of the social sciences, so that he needed help from someone like me. I felt confident about assisting him with the English language, but less confident that a 24-year old lecturer of quite limited experience could render the same service with the social sciences.”

“As it quickly turned out, my confidence in regard to English was misplaced. Karl's command of the language was, naturally, then imperfect so that my pencil made many rapid changes to what he put before me. But, as he also tells in Unended Quest, his first book (Die beiden Grundprobleme der Erkenntnistheorie) had been most critically read by Robert Lammer who had insisted that everything be made crystal clear, a lesson which Karl took permanently to heart and which he applied to my corrections. I had to justify all of them and was often in difficulty when confronted by Fowler's Modern English Usage, which was then Karl's main recreational reading-along with stories about Dr Dolittle. Karl had a strong sympathy with children and liked good stories for them. I don't think he missed seeing, during his time in Christchurch, any talkie of Deanna Durbin, an appealing child star who appeared in singing roles”.

“I had also, of course, like almost everyone else beyond Vienna's philosophical circles, no initial understanding of the methodological ideas which Karl had recently published in Der Logik der Forschung, and which he was now trying to apply to social science. I had unwittingly begun an informal post-graduate course in which, besides arguing with him about English, I learnt something about epistemology, natural science, probability and mathematics in return for a little help in regard to economics. More than that, our close friendship led to discussions over a wide range of subjects, with wonderful insights into the political conditions and intellectual life of postwar Austria and its neighbours. In his inimitable way, he stimulated my mind and widened its horizon. I have always been most grateful to him for that, and also for much personal kindness.”

“Work on the Poverty article was soon upset by the outbreak of war. I remember our sense of despair for Europe when listening together to a BBC report of Paul Reynaud's final appeal to the United States as France was succumbing to Hitler's guns, tanks and planes. Karl had already told me that he felt the still far from completed article was too abstract for wide appreciation, and that he would embark on a companion article to be called 'Marginal Notes on the History of Historicism'. He now regarded both these articles as his war work, and four years of most intense labour went into writing them. But much higher priority was given to the second which became The Open Society and Its Enemies, although this title was not adopted until shortly before publication.”

“Karl increased not only his own research effort but also his demands on my own time, somewhat to the resentment of the girl I had married within three months of my appointment to Canterbury University College, although our two wives also became warm friends. He now, however, had help from Henry Broadhead, the scholarly lecturer in Classics, with that half of the book which is devoted to Plato and in which authoritative translations and interpretations of this revered philosopher are sharply challenged. Apart from linguistic help, and giving Karl opportunity (which he always needed) to clarify his ideas by talking about them, my own contribution was mainly to the chapters on Marx. Our collaboration ceased in May 1942 when I entered the Royal New Zealand Air Force and was soon posted overseas.”

APPENDIX TWO

POPPER AND HAYEK ON PIECEMEAL SOCIAL ENGINEERING

When Hayek and Popper were young men both were socialists, Hayek a Fabian and Popper a communist. It has been said that anyone with a heart is a socialist in his youth, and they had special reasons to be one. Even before World War I, when Vienna was the glittering capital of a large empire, it had much poverty, and that stirred their consciences. After that war there was far worse poverty and a great ferment of Marxist ideas, stimulated by the Russian Revolution and by enthusiasm for idealistic policies of the Social Democrats who governed the city.

But the Marxists, of course, did not have it all their own way, even in Vienna. Their ideas were sharply challenged by some members of the Austrian School of Economics, and especially by Ludwig von Mises who, seizing without acknowledgment ideas of his teacher, Wieser, published a seminal article, Economic Calculation in the Socialist Commonwealth (1922). It demonstrated the impossibility of rational economic calculation, and so of rational decision making, in a centrally planned economy. Hayek, who had graduated from the University of Vienna with two doctorates, participated in Mises' famous seminar, and became a complete convert to his views about the superior merits of a competitive economy.

Popper had a different conversion to a similar viewpoint. After his father's fortune was lost in the postwar inflation he had gone to live in a kind of commune at a disused military hospital, and became a communist activist. But he was soon repelled by the egotistical assumption of his bourgeois comrades that, after the revolution, they would become commissars. He became still more repelled by the irresponsibility of Party leaders who led young people to stage a demonstration that provoked the police to fire and kill some of them. Already a keen interest in science had brought him to reject dogmatic theories, such as Marxism had become, so he ceased to be a communist, nor did he become a member of the Social Democratic Party because it, too, was dogmatically Marxist. Yet he admired much of the Party's social work for the people of Vienna, saw them as the only possible defence against the dire threat of fascism, and retained a strong belief in equality. Before, long, however, he became convinced that social equality, much as he valued it, was incompatible with the superior value of liberty.

In particular, he doubted that mass unemployment was simply due to clumsy intervention of governments into economic affairs, and warned that failure to deal with this or other serious social problems could be dangerous to both democratic institutions and economic rationality. Hayek reassured him that there was no disagreement between them on theoretical issues.

When he wrote this, Hayek could not have fully remembered what Popper had said about piecemeal social engineering. A major reason for his advocacy of it was that social scientists, - including Austrian economists - were far from having an adequate understanding of their phenomena. That was underlined by his stress on open criticism and careful monitoring of any social reform, of regarding it as an experiment which could give unexpected results that might well require modification of the reform. And, of course, a reform could seek to extend the scope for competitive markets by scrapping some controls or else to curtail that scope by introducing new controls.

For above all, Popper is a fallibilist who insists on our inevitable ignorance, on a Socratic approach to all our problems. His fallibilist scepticism extends, not only to social reformers, but just as much to those who are so impressed by the undesigned system of competitive markets that they oppose any attempt to remedy its deficiencies. I refer particularly to those who follow Ludwig von Mises in asserting, on what must be a priori grounds, the infallibility of consumer sovereignty and the optimality of free markets.

Murray Rothbart, for example, claims that Mises' praxeology 'can indeed demonstrate that laissez-faire will lead to harmony, prosperity and abundance, while government intervention leads to conflict and impoverishment.' Hayek long ago gave up this extreme view, if he ever held it. In The Road to Serfdom, he had recognized that competitive markets could not do everything that a society needed, and that there is 'a wide and unquestioned field for state activity' to 'create conditions in which competition will be as effective as possible, to supplement it where it cannot be made effective, and to provide services which, in the words of Adam Smith, "though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay any individual or small number of individuals"

In an address which he gave in 1956, Popper listed some of the social evils which he considered had been remedied or relieved by social cooperation. In addition to mass unemployment and poverty, he mentioned sickness and pain, penal cruelty, slavery or serfdom, religious or racial discrimination, lack of educational opportunities, rigid class differences and war.

Hayek moved closer to Popper's position again when, in an TEA paper of 1973, he acknowledged a growth of collective wants which a government can and should satisfy, provided that these wants related to the whole community, that the government did not try to monopolize services to meet them but allowed opportunity for alternative provision by private enterprise, and that these services were financed by non-discriminatory means. Yet in his last book, The Fatal Conceit, Hayek seems to have moved closer again to Mises' position. Approval of 'piecemeal improvement' is much less explicit, and examples are limited to reforms which bear on copyright, contract and property. (p. 69) A difference also seems to emerge in regard to what Popper has condemned as moral historicism,-'the philosophy of the identity of facts and standards.' For Hayek argues that morals, 'standing between instinct and reason', are identical with the abstract rules of an extended order, and change as it evolves. (p. 12) Is there a disturbing similarity here to the Marxian view that morals depend upon economic evolution? If so, Hayek had taken up a position that is both inconsistent with his own liberalism and discouraging to social reform. Liberalism, Popper maintains, is based on a dualism of facts and standards, 'for an essential part of this tradition is the recognition of the injustice that does exist in this world, and the resolve to try to help its victims' If, moreover, gaps between facts and standards are allowed to become too great, democracy, and so liberalism itself, can be threatened; the Weimar Republic, after all, did elect Hitler to power during a period of severe unemployment.

Differences like this between Hayek and Popper could, I think, have been ironed out by conversation between these two old friends. I would have no such optimism in regard to those dogmatists who claim that Austrian economic science, as they have developed it, shows with apodictic certainty the folly of any interference with a completely free, and so quite unregulated, market system. They claim for this imaginary system virtues that no other conceivable economic arrangements could possibly match, and see attempts to regulate or restrict it as necessarily leading to dire consequences, both economic and political.

It is doubtful if such views should really be called 'Austrian'. The older Austrians would not have subscribed to them. Carl Menger, founder of the School, criticized economists, like Say, who had an erroneous view of the concepts 'theory' and 'system' as they understood them to be 'nothing more than theorems obtained deductively from a priori maxims' . His successor, Wieser, according to Erich Streissler, 'was an interventionist liberal', and his successor, Mayer, 'insisted that Austrian theory was value-free, and was sceptical of Mises distortion of it.' Nor did all those who had attended Mises' seminar fully share his views about the folly of intervention in free markets. Fritz Machlup, for example, spoke of the error of identifying liberalism with laissez-faire, and held that 'the preservation of a maximum amount of freedom may call for government measures to maintain competition, which private contracts might restrict, to provide services which private enterprise cannot supply, and to prevent misery which private charity cannot cope with'.

There can be no sound basis for prejudging all possible reforms. Final truth has not been reached by any of the rival schools of economics,-nor will it ever be. Their theories, as Popper has shown, must always be subject to falsification or improvement in the light of experience. To show that collectivism is incompatible with liberty, and that it gives poor economic results, does not, by itself, establish a case for pure laissez-faire. We would still have to ask, as Menger and Popper insist, how far an existing situation could be improved or worsened by removing or introducing some kinds of intervention, and how far it might be further improved by better piecemeal social engineering.

And, as Popper stresses, improvement must involve reference to more than economic efficiency. It also involves considerations of such moral and intellectual values as individual freedom, democratic tradition, protection of the poor or suffering, advancement of knowledge and education, and promotion of some basic aesthetic values. Civilization, no doubt, depends very much upon Hayek's extended order of cooperation, but the two are hardly identical. If they were, we should have to deny that Gupta India or Sung China were civilized because their economies were highly regulated.

APPENDIX THREE

ADVICE TO RUSSIAN READERS OF THE OPEN SOCIETY

In 1992 Karl Popper was preparing a Russian edition of The Open Society, and kindly allowed me to write about his English version of a message to his Russian readers. It declared that the main idea of The Open Society is The Rule of Law.

The West has become wealthy because of the development of free markets, and these have required both a Civil Law, which includes property and mercantile laws, and a Criminal Law, whose most important aspect is that no one can be punished before his guilt has been proved beyond reasonable doubt.

Criminal Law is a necessary evil. Civil Law, however, is a great good because it aims at personal freedom-at enabling people to live together without the use of violence. It has enabled free markets to develop with great benefits to living standards. They need a framework of law to provide for the making, and enforcement, of numerous contracts between independent producers, suppliers, customers and workers. The Civil Law of Western societies has thus had a parallel growth with that of free markets and the industries which use 'and serve them.

The Revolution of 1917 destroyed this legal tradition in Russia, together with free markets. It would take a very long time to reestablish it unless Russia now copies one of the West's systems of Civil Law, just as Japan did after the Meiji restoration by quickly adopting the German legal system. Popper suggests that Russia should choose either the French or the German codes; the British never developed a code of law that could be taken over en bloc, and in the United States there are different state codes which were themselves developed from British law.

Adoption of the French or German codes could not fit Russia anything like perfectly, so that its Parliament would have to make changes as the need appeared for them, just as Western states have had to continuously revise or up date their own established codes of law.

A much greater difficulty is to make real the Rule of Law. To achieve this the Russian State would have to educate its legal officers in the newly adopted code and persuade them to take it seriously, especially judges and other members of the courts of law. In times of peace, no higher interest than that of the State should be allowed to prevail. This most difficult task is really that of establishing an Open Society-of bringing about a new, flexible and living tradition of the Rule of Law, as opposed to 'the rigid tradition of the Rule of Fear' that had characterized the Communist bureaucracy. It might be hastened and assisted if Russia were to follow Japan's old example of sending very good postgraduate law students abroad to study and gain experience of a Western system of Civil Law.

It is unthinkable that Russia can approach Western standards of living until it establishes a Rule of Law to serve a free market economy. Popper regards this insight as fundamental, and of the greatest urgency'. For a market economy is extremely complex, involving millions of 'peaceful, hard-working citizens', and can function properly only if they can trust one another, 'and as long as they know what honesty and decency and truth demand'. For that they need trust in the law, in the officers who enforce it, and in the judges who administer it.

Among the serious risks of privatising Russia's state industries, is that this process can involve serious corruption and swindling unless there are effective systems of Civil and Criminal Laws to hold them in check. Without them privatisation is unlikely to promote beneficial development of free markets and could well bring political dangers that would undermine attempts at economic reform.

BIBLIOGRAPHY

Agassi, J. 'The Legacy of Lakatos'. Philosophy of the Social Sciences, 1979.